In 1927, two US Army Air Corps Majors, Henry "Hap" Arnold and Carl Spaatz, founded an airline to fly passengers and mail between Key West and Havana. The company they ambitiously called Pan American Airways lived up to its name and more. Pan Am became the unofficial international US flag carrier. It acquired a global cachet. It was a leader in aviation advances, including adopting the Boeing 747 jumbo jet and computerized reservation systems. And it was sexy.
It went out of business in 1991.
On November 5th, the NASDAQ composite was 15,972. And Tesla stock traded at its all-time high, $407. Today, the NASDAQ is off 2% from that peak. Tesla is down 64%. While stock price does not equal sales, it does reflect the market’s opinion of a company's prospects.
In 2023, Tesla was still the #1 seller of all-electric battery vehicles (BEVs). In 2024, it will probably lose that title to China’s BYD — which is already #1 in electric vehicles (EVs) if you include plug-in hybrid EVs (PHEVs).
Behind those two BEV behemoths, another four Chinese, three German, and two South Korean companies round out the top ten. In addition, legacy carmakers — including the Americans if they want to stay relevant — will increasingly shift to BEV and hybrid models, despite Republican whining.
Even Rolls-Royce, the epitome of petrol-powered automotive excellence, plans to be 100% battery-powered by 2030.
Companies that want to prosper in an expanding but highly competitive market must focus hard on technology, manufacturing, marketing, distribution, and the other facets of running a growing and profitable business.
This raises the question, is Tesla still that monomaniacally focused? Or has their once admired but now widely scorned CEO, Elon Musk, spiraled too far into distracted insanity?
The numbers do not look good. Today, Tesla reported a 9% decline in 2024 Q1 earnings, its first quarterly fall since 2012. The company acknowledged that the outlook for the rest of 2024 is grim, saying, “volume growth rate may be notably lower than the growth rate achieved in 2023.”
In addition, profits are taking a beating. Net income dropped 55% to $1.13 billion from $2.51 billion a year ago.
Elon Musk, acting as chief cheerleader, predicted a brighter future for 2025. On a call with stockholders, he said the company plans to start production of new models in “early 2025 if not late this year.” We will see if Musk’s words will prove to be smoke or substance.
Meanwhile, Reuters reports today that things are not rosy for Tesla employees.
Tesla said it will lay off 6,020 employees in Texas and California ahead of its quarterly results on Tuesday when CEO Elon Musk is expected to outline the electric vehicle maker's strategy to combat slowing demand and falling margins.
Last week, Tesla announced a more than 10% cut in its global workforce under pressure from dropping sales and an intensifying price war among EV makers, without revealing the number of employees the job cuts would impact.
Things are also suboptimal on the production front. Last Wednesday, the National Highway Traffic Safety Administration (NHTSA) reported Tesla has issued a recall of nearly 4,000 Cybertrucks. The NHTSA said the trapped accelerator pedal can cause the vehicle to accelerate unintentionally, increasing the risk of a crash. According to the agency, the accelerator pedal pad may "dislodge and cause the pedal to become trapped by the interior trim.”
Cars get recalled all the time. But this defect seems sloppy for a truck priced between $82,335 and $102,850.
Worse for Tesla is the unreliability of its self-driving technology. Musk plans to license it to other car manufacturers. And it could be a gold mine when the bugs are worked out. But in the interim, it is not good PR.
Then there is the man himself. Musk’s mindset has become increasingly bizarre. It is no surprise an industrialist promotes Republican policies that favor profit over people and the environment. But Tesla’s unhinged boss has gone full MAGA and cannonballed into the conspiracy theory pool.
He widely overpaid for Twitter and has seemingly done everything possible to reduce its value — including a branding change to “X”. A series of own goals has reduced the home of political and news commentary to a cesspit of MAGA ravings as reputable advertisers fled. We cannot know how bad the financial picture is as it is a privately owned concern. But even Elon admits Twitter/X’s value is in the gutter.
People have compared Musk to Howard Hughes — another transportation mogul who spiraled into madness. I do not know if that is apt. But let us note that Hughes owned TWA — another prestige brand that went belly-up.
Is the past prologue. Or will Musk get out of his own way and hand the daily management of Tesla over to someone who can focus on the brand.